Thursday, March 20, 2008

Whatever else might be said about the iPhone SDK (software development kit) and software distribution model Apple recently unveiled, it changes the way software is delivered from the developer to the customer.

Developers don’t need a marketing department to sell iPhone software if they are assured that all customers will be checking the same software category listings at iTunes Store. Heck, they don’t need a software company at all. A really good programmer (suddenly unemployed) could fit an iPhone development project in between job interviews, and given the ease of development the SDK offers, could have a useful piece of software on the market by the time the job offers started to come in.

I doubt this is the beginning of a new business model for software development, but with programming getting easier and easier, the distribution system for software will have to get more casual in one way or another. When it takes only a few hundred hours of development work to create new software, you don’t want the distribution channel to become a barrier between the developers and the users.

Friday, March 14, 2008

You know the economy is in trouble when the Wizard of Oz has to haul out the smoke and mirrors to bail out a private company on the brink of collapse — and then the President emerges from behind the curtain a few minutes later to give a speech urging Americans to remain optimistic.

Lest we forget the lessons of the last few weeks, it was optimism that got some of the largest companies on Wall Street into this mess. Optimism turns people who are supposed to be investors and money managers into gamblers. After all, why not bet if you know you’re going to win?

That’s the kind of thinking that nearly closed down a securities firm last night. They rolled the dice one too many times, crapped out, and had to spend a sleepless night calling in help from Washington so they could open for business today.

The company insists it’s fine, but one has to wonder if the purpose of the 28-day loan from the Fed is simply to allow an orderly shutdown (and not incidentally, avoid a stock market crash).

And if that shutdown takes place, which employees will come out better — the ones who are crossing their fingers and hoping everything works out, or the ones who tonight are already circulating their resumes?

Optimism is a virtue, but prudence has to come first. It is better to have the sunny outlook that leads you to work and build things than the gleeful disregard that leads you to gamble, cross your fingers, and hope for the best. The idea that investing is gambling has become so pervasive that the gamblers have taken over Wall Street. Yet the heart of investing is work — doing more work now so that you can do less work in the future. A friend spent two days last August sealing cracks and adding insulation to his house. The result of that effort was a heating cost that this winter was at least 10 percent lower. Google got where it is because its principals spent years working out algorithms for text indexing so that we could all have faster web searches. In all real investing there is this kind of connection between the work and the payoff. The fundamental problem with the hedge funds and the other airy investment vehicles that threaten to bring down Wall Street is that the link between investing and work has been lost. They are really just gambling. And when you gamble, no matter how optimistic you are, sooner or later you have to lose.

Sunday, March 9, 2008

Daylight time has come earlier this year. It’s the result of a curious action by Congress two years ago that passed without any real debate nor any justification presented to the public. The extended daylight time was supposed to save energy and reduce oil imports but, with the morning commute starting before dawn, it’s entirely possible that the opposite effect is occurring. There is no hard data either way and Congress does not seem to care in the slightest anyway.

I think it’s time to start calling daylight saving time what it really is: baseball saving time. It’s no coincidence how closely the daylight saving time period matches the baseball season — no coincidence, because unless someone can offer a credible alternative explanation, it appears that the real reason for daylight saving time is to benefit the professional baseball teams. It takes a lot of light bulbs to light a stadium and if all the night games actually started at nightfall, the baseball owners would pay millions more for electric lighting.

It’s slightly crazy to turn a country upside down for the benefit of one small entertainment category, but daylight saving time isn’t the only concession baseball has received from Washington. Ask them to explain the logic behind baseball’s antitrust exemption. They can’t do it because there is no reason for it except that the Supreme Court one day decided they would cut baseball a break, and they made up a crazy legal theory of why baseball teams should be exempt from a law that applies to everyone else.

Baseball isn’t even that popular anymore. There was a time when it was considered the national pastime, but now it’s primarily a television program with an audience that ranks just slightly higher than the weather forecast. And when you look at it that way, it’s hard to say that it’s important enough to have us all jumping between time zones at the beginning and end of every baseball season. It’s not that I don’t like baseball. I suppose you could say I’m enough of a purist when it comes to baseball to think there’s something wrong with so-called night games being played in the late afternoon.

In case you haven’t guessed, I would rather do away with daylight time entirely. Forcing everyone in the Eastern Time zone to tune their clocks to the Atlantic Time meridian for half the year on the theory that it will somehow make them behave more efficiently goes against two of my favorite principles, individual responsibility and government integrity. And the other U.S. time zones are even farther removed from their natural meridians during daylight time. But realistically, the baseball people own Congress on this issue, and daylight time isn’t going to just go away anytime soon.

So as a first step in that direction, I’m proposing to change the name of daylight time. Let’s start calling it what it really is, baseball saving time, or baseball time for short. If we call it that, then after a few years, people might start asking, “Why do we have baseball time, anyway?” And then Congress might be persuaded to cut back on baseball time and eventually eliminate it completely.

Okay, I suppose that’s not realistic either. But however it happens, if enough people start asking, “Who really benefits from baseball saving time?” that’s when we’ll have the possibility of restoring integrity to the official time that the United States keeps.

Thursday, March 6, 2008

The recent decline in home values has left U.S. consumers with a sharp decline in home equity. According to the Federal Reserve Bank, home equity is less than 50 percent for the first time since the era of the Great Depression. Looking back, the Fed says home equity slipped below 50 percent in the second quarter of 2007 and continued to fall, ending the year less than 48 percent.

Another way of looking at this is that home debt is now greater than home equity. The average homeowner’s share of ownership in a house is less than they owe on its mortgage. Looking at it still another way, American homes now belong primarily to financial institutions rather than to individuals.

You might think all the fabulously rich people out there would bring the average up, but they don’t. Many multimillionaires owe millions on their homes, as we saw, for example, in the recent headlines about a possible foreclosure at Michael Jackson’s Neverland Ranch.

And so, as a nation, banks and lenders mostly own our homes. Picture the Mississippi River, and imagine that the financial institutions own the homes east of the Mississippi, while people own only the homes west of the Mississippi.

Yikes! It’s no wonder if American consumers are feeling a bit skittish lately. If we keep spending left and right, will we end up owning our homes or not?

It is not just a rhetorical question. Some experts think 15 million households will lose their homes before next year is over.

There are other problems putting pressure on homeowners at the same time. Higher energy prices mean that more money goes to heat and cool a home. The financial crisis means that homeowners can’t count on getting a new mortgage if something goes wrong. Some homeowners are realizing they can’t afford to move — until they accumulate more home equity, they’re stuck where they are.

It’s part of a larger picture of an economy showing signs of cracks. It’s a sobering situation for consumers. Now performing without a safety net, we know we’d better get it right. And that helps to explain why the consumer-spending boom that had kept the U.S. economy limping forward for the past five years has come to a sudden stop.